EUR/AUD Price Forecast: Tests 1.6300, nine-day EMA, descending channel’s upper boundary
Fxstreet
Nov 14, 2024 6:01 AM
- EUR/AUD tests an immediate barrier at a nine-day EMA at 1.6308 level near the upper boundary of the descending channel.
- An emergence of the bullish bias is possible If the 14-day RSI rises above 50 level.
- The primary support appears at its three-week low of 1.6163.
The EUR/AUD cross gains ground for the third consecutive day, trading near the 1.6300 mark during the Asian session on Thursday. On the daily chart, there are signs that the momentum may be shifting from bearish to bullish as the cross attempts to break above the descending channel pattern.
The 14-day Relative Strength Index (RSI) remains just below the 50 level, indicating continued bearish momentum, though a shift could be on the horizon. If the 14-day RSI rises above 50, it would signal the emergence of bullish sentiment.
On the upside, the EUR/AUD cross tests the immediate resistance at the nine-day Exponential Moving Average (EMA) at the 1.6308 level, aligned with the upper boundary of the descending channel. A breakout above this channel could weaken the bearish bias and support the cross to navigate the region around its two-month high of 1.6600, which was recorded on November 1.
In terms of support, the EUR/AUD cross would meet support at its three-week low of 1.6163, which was recorded on November 7. A break below this level could reinforce the bearish bias and lead the cross to approach the “throwback support” at the psychological level of 1.6000.
EUR/AUD: Daily Chart
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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